LNG volumes at B.C. resource outrank U.S. plays, study says

CALGARY – British Columbia is touting an immense oil and gas resource identified by a new study of the province’s emerging shale prospects as a competitive advantage in the race to develop a liquefied natural gas industry.

Plans to build a greenfield LNG industry at Kitimat and Prince Rupert on the British Columbia coast may rival investments in Alberta’s natural gas industry, but the province and the industry must move quickly to beat out the competition and capture market share in Asia, according to a new report by Canada West Foundation.

The province’s Montney play could hold 449 trillion cubic feet of so-called marketable natural gas, 14,521 million barrels of petroleum liquids and 1,125 million barrels of oil, according to joint research published Wednesday by Canada’s National Energy Board, together with regulators in B.C. and Alberta. Marketable natural gas refers to the amount of petroleum potentially recoverable and ready for use by consumers.

Such volumes, equivalent to 145 years of Canada’s 2012 gas consumption, outrank resource assessments of the prolific Marcellus and Haynesville shale plays in the United States, said Mike Johnson, supply analyst with the NEB.

“When we first started this we kind of all suspected that it was going to be a large result, only because it’s a very big formation with quite a lot of potential all the way through it,” Mr. Johnson said. “But when we finally did run the numbers it was surprising how large they were.”

International energy giants have placed large wagers on B.C.’s resource potential. The Montney play, which cuts southeast across a vast tract of northeast B.C. from Fort Nelson before spilling into Alberta, is a key staging ground for production expected to feed monster export plants proposed for the Pacific coast by companies such as Chevron Corp., Royal Dutch Shell and Malaysia’s Petronas.

Rich Coleman, B.C.’s minister of natural gas development, said Wednesday’s resource assessment shows the formation “will support economic activity in our province for a very long time as a supply hub for liquefied natural gas development.”

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Yet it remains to be seen how many export projects are actually built. None of the dozen or so plants proposed for the West Coast has been sanctioned, although the companies are keen to capitalize on the gulf between North American gas prices and premiums paid for the fuel in Asia.

Alberta and B.C. have lagged rival jurisdictions in identifying and developing shale gas resources. Production in the Montney stood at 1.7 billion cubic feet a day last year, slightly more than 12% of Canada’s total production of 13.9 bcf/d, according to the NEB.

Still, the formation has been a hive of energy deal-making activity in recent years, with companies such as ExxonMobil Corp., Chevron and Encana Corp. amassing land positions to tap liquids-rich reserves.

When we finally did run the numbers it was surprising how large they were

The high proportion of rock soaked in petroleum liquids found in the Montney also means it’s “still actively being drilled,” Mr. Johnson said, while output from other zones has stalled. Liquids such as butane and propane typically fetch a higher price than straight-up gas.

The trove of fuel identified in Wednesday’s study puts the Montney deposits in league with some of the world’s largest gas fields, including the Urengoy in Russia and Qatar’s massive North Field, a comparison with International Energy Agency data shows.

But other assessments offer a more modest portrait. Ziff Energy Group, a division of HSB Solomon Associates, conservatively pegs technically recoverable gas in the Montney at 150 trillion cubic feet, said Edward Kallio, director of gas consulting with the firm.

Resource assessments can be “all over the map,” he said. Even so, he said, the Montney is a “huge” play. By contrast, the long-delayed Mackenzie Valley Pipeline led by Imperial Oil Ltd. was conceived to funnel 1.2 billion cubic feet of Arctic gas a day to southern markets.

“The Mackenzie pipeline was predicated on six to seven tcf [of reserves] and now you’re talking about 450 tcf just in the Montney alone,” he said.